Centre releases Rs 17,000 crore GST compensation to states for April-June

The Finance Ministry building situated in North Block, New Delhi

The central government has released Rs 17,000 crore to states as Goods and Services Tax (GST) compensation for April-June, the finance ministry said on November 25.

The funds were released on November 24, a day before Union Finance Minister Nirmala Sitharaman met her state counterparts in the Capital to take their inputs and suggestions for the upcoming Buduget for 2023-24, expected to be presented on February 1.

With the latest release of the GST compenstion, the total amount given to states and Union Territories so far this financial year is Rs 1.16 lakh crore.

"This is despite the fact that total Cess collection till October, 2022 is only Rs 72,147 crore and the balance of Rs 43,515 crore is being released by the Centre from its own resources," the finance ministry said in a statement.

"With this release, the Centre has released, in advance, the entire amount of Cess estimated to be collected this year till March-end available for payment of compensation to States. This decision was taken to assist the States in managing their resources and ensuring that their programmes especially the expenditure on capital is carried out successfully during the financial year," the statement added.

With the protected GST revenue period of five years ending on June 30, states are now not entitled to be compensated for any shortfall in their GST revenues.

As per the law, states were guaranteed to receive 14 percent growth in their GST revenues every year for the first five years of the indirect tax regime, with any shortfall to be made up from the compensation cess fund.

In October, India collected Rs 1.52 lakh crore as GST - the second-highest ever. However, as many as 17 states and Union Territories saw their revenue either decline on a year-on-year basis or post a growth of under 14 percent.